Last Week: Japan-US Political Relations• Structure: highly constrained by the bilateral alliance in the post-war period – having to align with its sole ally during the bi-polar structure of the Cold War.

• Agency: forged close political ties at the elite level with US bureaucrats and policy-makers – participating (logistically) in US-led wars, but also seizing opportunities to normalize relations with communist powers.

• Norms: close adherence to bilateralism – countered to a degree by domestic strength of anti-militarism.

Unit 5 Japan’s Economic Relations with the

United States

Prof. Glenn Hook

Aim

• To apply the concepts and theoretical approach

introduced to Japan’s economic relations with the

United States.

Objectives 1. To introduce Japan’s economic development and

identify the relative importance of structure, agency and norms in explaining the US-Japan economic relationship;

2. To introduce how structure, agency and norms can be applied to the issue of trade imbalance between the US and Japan;

3. To employ structure, agency and norms to discuss trade conflicts, capital flows and investment, and economic agreements in the US-Japan bilateral relationship.

Main stages of Japan’s economic development

• Global economic ascent of Japan (1950s to 1990s);

• Economic downturn (1990s to early 21st Century);

• Temporary upturn (2004);

• Continued stagnation up to (2007);

• Substantial downturn caused by global economic crisis

and triple disaster (2008-2012);• “Abenomics” early in his second term in office, PM Abe pushes through a huge stimulus package in an effort to kick-start the economy – weakening the yen and boosting exports (2013).

US-Japan Bilateral Economic Relationship: Structure, Agency and Norms

• Structure: dominated by the US economy with an increasing trend of multilateralism (APEC, WTO, etc.);

• Agency: • economic ministries and agencies (MITI/METI, MOF,

MOFA); • pro-US prime ministers and big businesses; • Norms: Developmentalism; Economism; Bilateralism/

Multilateralism.

US-Japan Trade Relationship: Structure, Agency and Norms

• Trade relations:

• Exports;

• Imports;

• Trade imbalance;

Power of the Yen

Source: Wikimedia Commons

Old One Yen silver convertible note

Steep Appreciation of Yen (1997-2012)

Source: United States Federal Reserve Bank of New York

The Yen has weakened considerably in 2013 as a result of “Abenomics” - $1/¥93

Japan’s trade surplus –v– the US

From 2009 Japan’s trade surplus-v-the US has risen year-on-year (US$40 billion 2011)Sources: Office of the United States Trade Representative / Japan Ministry of Finance

US-Japan Trade Conflicts: Structure Agency and Norms

• Automobiles: Situation: cause of Japanese

trade surplus –v– US

Japan’s response: appealed to a

multilateral institution, the

WTO;

Outcome: Japan appealed to the

international norms of

multilateralism to supplement

bilateralism or to offset the US

power/pressure.

Honda Accord Meets Its Makers

• Semi-conductors: Situation: lack US access to

Japanese market

Japan’s response: to expand

foreign access to the home

market in semi-conductors

Conflict Resurfaced: set-up a

multilateral forum for dealing

with future disputes in this

sector.

US-Japan Trade Conflicts: Structure Agency and Norms

• Steel: Situation: Japanese opposition to US

anti-dumping measures/tariffs

Japan’s response: brought a petition

to the WTO under the dispute

settlement mechanism;

Outcome: The US lifted the tariffs;

Japan has dealt with a major

bilateral economic conflict through

multilateral mechanisms;

US-Japan Trade Conflicts: Structure Agency and Norms

• Beef:Situation: Japanese ban on US beef

Japan’s response: centering around the

standard to be adopted in regard to the

Japanese consumer’s exposure to risk;

Outcome: Japan banned all US beef

imports in 2003. Japan resumed

buying beef in 2006 after a bilateral

trade agreement setting new safety

standards;

US-Japan Trade Conflicts: Structure Agency and Norms

Reasons for the change in US-Japan bilateral trade conflicts

• The change in the alliance relationship following the Gulf War and the

greater willingness of Japan to cooperate with the US;

• The change in the relative strengths of the two economies;

• The establishment of mechanisms for dialogue between the two

sides: (from Structural Impediments Initiative to US-Japan Economic

Partnership for Growth, 2001);

• An Abe-led LDP seen as, essentially, pro-alliance, but ongoing fiscal

pressures could lead to future trade conflicts – uncertainty due to the

TPP in both camps.

Capital flows and investment relations

• Creation of large trade surpluses (1971-1991)

• Rapid appreciation of the Yen (1985-2012) –

countered by Abenomics (2013)

• Globalized manufacturing base• Inability of Japan to transfer financial power into

political power.

• Opening up of financial markets – to allow access from US and other foreign actors.

• JETRO encouragement of foreign investments

Japan and the US in regional projects and free trade agreements

• Possibility of FTA or TPP as Japan seeks to keep competitive edge in Asia-Pacific region

• Japanese endorsement of NAFTA – allowing access to cheaper Mexican labour markets

• Active participation in APEC

• Maintenance of developmental and economist norms

Conclusion

• Japan changed from a devastated economy through a

second-tier economy, to a challenger to the US economic

dominance;

• Case studies demonstrate US dominance and pressure in the

trade disputes;

• In the Post-Cold War period, Japan has learned to use the

multilateral institutions to seek a solution more favorable to its

national interests.